December orders lead to more bond pain, no gains

The December durable goods orders just hit the tape. They showed:

* A 3.1% headline gain, up from a revised 2.2% in November

* A gain of 2.3% after you strip out transportation orders. That's more than four times the 0.5% forecast.

* Non-defense capital goods ex-aircraft orders, a key measure of core business spending, jumped 2.4%, the biggest gain since September.

Bonds came into the number weak, with 10-year T-note prices taking out the last level of support I mentioned yesterday. They're getting even weaker as I write. Long bonds are down 11/32 right now, while 10-year yields are up a couple basis points to 4.9%.

There is simply no justification for a Federal Reserve Board rate cut in this environment ... and there may even be reason for a Fed HIKE. Just look at market expectations for inflation -- the 10-year TIPS spread has jumped to around 240 basis points ... a multi-month high. If you want to read more about this indicator, check out this post from mid-December.